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Global mergers and purchase are essential to many corporate strategies for growth. They provide access to new markets industries, customers, products, and technologies. They also boost financial strength through increased scope and impact. However, companies must be mindful about a variety of issues when making international acquisitions and divestitures, from taxation and regulatory issues to cultural differences.
In 2024, the complexities of the capital markets and uncertain macroeconomic conditions have weighed heavily on deal activity. However we expect M&A to pick up in the second portion of the year as these headwinds ease and the results of a variety of elections are known.
M&A can also be driven by strategic goals, such as consolidation and digital innovation. For example, rapid developments in AI, predictive robotics, and smart factories are driving efficiencies in manufacturing in the industrial sector.
A key strategy is to acquire companies in different markets that offer similar products or services to increase the reach of their customers and market. This is known as market extension. PepsiCo bought Pizza Hut in order to boost its soft drinks sales.
M&A trends include a shift to mitigate the risk of geopolitical instability by focusing on markets that have better prospects, investing in vertically, and improving supply chain resilience. Finally, as the supply of cash and debt decreases, we expect sellers and buyers to embrace more complex structures in order to bridge the gap in valuations, like stock swaps, minority stake sales and earnouts. This could mean using private equity funds to make the deal feasible.